Managerial Accounting: P6-15 Far North Telecom, Ltd., of Ontario, has organized a new division

Managerial Accounting
 
Problem 6-15 Comprehensive Problem with Labor Fixed 
Far North Telecom, Ltd., of Ontario, has organized a new division to manufacture and sell specialty cellular telephones. The division's monthly costs are shown below:
  Manufacturing costs: 
   
    Variable costs per unit: 
       Direct materials                    88
       Variable manufacturing overhead                       3
  Fixed manufacturing overhead costs (total)           220,400
    Selling and administrative costs: 
     Variable 12% of sales      12% of sales
     Fixed (total)           163,000
 
Far North Telecom regards all of its workers as full-time employees and the company has a long-standing no layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labor costs in its fixed manufacturing overhead. The cellular phones sell for $330 each. During September, the first month of operations, the following activity was recorded:
  Units produced              3,800
  Units sold               3,000
 
1. Compute the unit product cost under:
a. Absorption Costing
b. Variable Costing
 
2.  Prepare an absorption costing income statement for September.(Input all amounts as positive values. Omit the "$" sign in your response.)
3.  Prepare a contribution format income statement for September using variable costing. (Input all amounts as positive values except net operating loss which should be indicated by a minus sign. Omit the "$" sign in your response.)
4. Assume that the company must obtain additional financing in order to continue operations. As a member of top management, would you prefer to rely on the statement in (2) above or in (3) above when meeting with a group of prospective investors?
5.  Reconcile the absorption costing and variable costing net operating incomes in requirement 2 and 3 above. (Negative amounts should be indicated by a minus sign. Omit the "$" sign in your response.)